How Will the Debt Ceiling Debate Affect Gold Prices?
Source: http://moneymorning.com/2013/01/22/how-will-the-debt-ceiling-debate-affect-gold-prices/Posted on Tuesday, January 22nd, 2013 | In Uncategorized
If you're wondering how the debt ceiling debate will affect gold prices, you need to check out a new report from Goldman Sachs Group Inc. (NYSE: GS).
Investment powerhouse Goldman believes gold prices will log impressive gains over the next three months as the debt ceiling debate takes center stage on Capitol Hill. The bank is advising investors to position portfolios ahead of upward moves in the precious metal.
"We see current prices as a good entry point to re-establish fresh longs," Goldman analysts Damien Courvalin and Alec Phillips wrote in a Jan. 18 report.
The bank reaffirmed its three-month price target for gold of $1,825 an ounce. (Gold was trading at $1,695.20 in New York Tuesday.)
"The uncertainty associated with these (debt-ceiling) issues, combined with our economists' forecast for weak U.S. GDP growth in the first half of 2013 following the negative impact of higher taxes, will push gold" to the three-month target, the report stated.
The Goldman strategists pointed out six instances between 1996 and 2007 when the country hit the debt ceiling and the Treasury responded by using its muscle to execute "extraordinary measures" to keep the country afloat and running.
Gold prices rallied some 10% in half of these instances in the month prior to the debt-limit increase.
The commodity enjoyed unprecedented robust momentum during the last debt standoff in 2011, which continued for several weeks amid heated negotiations. During that span, the yellow metal set a series of record highs, causing a gargantuan gold-rush frenzy not seen since prospecting days.
The bullish view on gold is shared by bullion bank ScotiaMocatta, as reflected in its January Metal Matters Monthly.
"The financial system is drowning in debt and there seems no end in sight to ongoing massive budget deficits," the bank wrote. "Confidence in the financial system and in the fiat government paper that facilitates it will remain low."
Nic Brown of France's bullion bank Natixis is also bullish on gold prices and recently told Reuters, "If there was a reason for buying gold, you've got two good ones." He cited February's Chinese New Year, a celebratory time trendy for gifting gold, and the coming U.S. debt-ceiling showdown.
"We're surprised at how low gold prices are," Brown added.
How to Buy Gold During Debt Ceiling Debate
Market participants have a bevy of options when considering gold investments that will soar as debt ceiling debates continue. Three popular choices include:
- Gold Bullion, Bars and Coins
For centuries, gold coins, bars and bullion have been recognized as a premier way to preserve wealth and purchasing power. Gold is revered for retaining its store of value and remains a significant safe haven in times of crisis. Bullion is real, honest money, deemed by some to be the world's finest form of currency.
- Gold ETFs
Gold exchange-traded funds (ETFs) like the SPDR Gold Trust (NYSE: GLD), iShares Gold Trust (NYSE: IAU) and the ETFS Gold Trust (NYSE: SGOL) provide investors easily traded investment vehicles to take advantage of gold's movements. Many brokerage houses have cut trading costs for ETFs, making moving in and out of them cost-effective.
- Individual Gold Stocks
"A jump in gold prices will be even better for gold miners. The reason for that is called leverage," Money Morning Executive Editor William Patalon III wrote in his 2013 Guide to Investing in Gold.
"When gold prices jump, a gold producer sees its earnings accelerate at a faster pace than the price of the actual metal," Patalon explained.
Three active equities in this category are Barrick Gold Corp. (NYSE: ABX), Newmont Mining Corp. (NYSE: NEM) and Kinross Gold Corp. (NYSE: KGC).
You can read Patalon's full report on investing in gold here.
For the best investing opportunities in the yellow metal, read all Money Morning coverage of gold prices.
Related Articles and News:
- Money Morning:
Gold Prices: Have We Reached Peak Gold? - Money Morning:
Your 2013 Guide to Investing in Gold - Money Morning:
Why Obama's Victory Means Higher Gold Price - Business Insider:
Goldman Sachs: Buy Gold - Bloomberg News:
Goldman Forecasts Gold rally Amid Debt-Ceiling Confrontation - SD Bullion:
Price of Gold Ahead of Chinese New Year Buying, US Debt Ceiling Deadline
About Money Morning (http://moneymorning.com)
Money Moves the Markets; Money Morning Lets You Move First We’re in the midst of the greatest investing boom in almost 60 years. And rest assured - this boom is not about to end anytime soon. You see, the “flattening of the world” continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially ; and a technological revolution even in the most distant markets on the planet. The bottom line is this: With U.S. influence slipping, and the dollar declining as well, investors who think too narrowly about this transformation will face years of meager returns. But those who embrace this new global reality can make themselves very wealthy. # Over the next 25 years, America’s share of the worldwide economic pie will slip from 28% to 24%… # Even as Asia’s share almost doubles ;which means it will account for a whopping 55% of the global economy by 2030. The big brokerage firms are making a killing on the global boom. Yet Wall Street reserves the timeliest information - and the best profit opportunities - for its partners or wealthiest clients. And the Securities and Exchange Commission doesn’t help the everyday investor much either. The second sad fact is this: While you can buy any U.S. or Canadian stock you want, the SEC prohibits you from purchasing many of the available international stocks. The reason: Foreign companies that haven’t registered with the SEC are off-limits to most U.S. individual investors. Our worldwide research staff includes former investment bankers, international financiers, emerging markets specialists and veteran financial journalists. Our experts know that certain capital flows essentially act as a “leading indicator” of future profit opportunities. These are opportunities that you won’t be reading or hearing about anywhere else. Each weekday morning, in a readable style you can digest in just a few minutes, you will reap the benefits of our research and expert experiences. Indeed, Money Morning will bring you: # The latest reports on China, Japan, Emerging Europe, and the other global hot spots where most investor wealth will be created in the months and years to come… # Reports on companies you’ve likely never heard of - even though they’re poised to sell billions worth of their wares to “new middle class” customers around the world… # Information on the U.S. companies shrewd enough to cash in on this boom in global; # The latest developments in banking, interest rates, foreign investment and other global investing topics; # Advice on how to invest in currencies, precious metals, commodities and energy # Inside news on the hottest investments, including water, uranium and private equity… # And news on rules and regulations, financial trends and strategies - and any other “market intelligence” that you will need to become a shrewd-and-successful investor in the greatest global investing boom most of us will ever see. Money does move markets. But Money Morning lets you move first. |
No recommendations, either expressed or implied, are being made to buy, sell, hold or short any of the mentioned stocks. No legal, tax or accounting advice is expressed or implied. Always contact your attorney, CPA, or tax advisor before acting on any legal or tax issues. StraightStocks.com is not responsible for the content, products, or services of any of the advertisers on this site. StraightStocks.com receives compensation from advertisers on this blog. Services and products referred to herein are trademarks, registered trademarks, servicemarks, and/or registered servicemarks of their respective trademark or servicemark owners.